Macy's CEO Jeff Gennette says the holiday season started off well, but then mid-December rolled around and things went downhill. Business didn't pick up until the week of Christmas, he said in a statement.

Sales growth in areas like fine jewelry and women's shoes was offset by underperformance in some categories, like fashion watches and seasonal sleepwear; temporary fulfillment changes after a fire at a West Virginia distribution center; and an "underestimation" of the impact that a pre-Christmas promotional event would have.

"In our view, the main issues came from the stores," said GlobalData's Saunders. "Some stores had virtually no holiday cheer and were crammed full of dull merchandise. This unpleasant and uninspiring shipping environment meant Macy's was not able to capitalize on strong footfall to malls and cities."

Macy's shares plummeted nearly 19% in Thursday trading, dragging down other retailers. Shares closed down 17.7%, the biggest percent decline on record, based on data going back to 1992. Even Target Corp. (TGT) , which reported upbeat holiday results, wasn't resistant to the knock-on effect.

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